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Kiwis circumspect on home buying

Kiwis circumspect on home buying

(3 February 2004 – New Zealand) A growing number of Kiwis are cautious about buying homes in the current market climate, believing interest rates are likely to rise again. ASB Bank’s Housing Confidence Survey for the December 2003 reveals that 22 percent of New Zealanders consider now to be a bad time to buy houses while 47 percent tip house prices to continue rising.

ASB chief economist Anthony Byett said in the short term house prices would continue increasing, however, the longer term picture was less clear.

"House price increases have well outstripped rent and income increases and investment demand appears to be playing a growing role in the market. Capital gain is likely to be the main factor driving investor demand," he said.

"The initial impetus to the housing boom we are experiencing was a fundamental increase in net immigration. Now the driving forces appear more related to investment demand and relatively low interest rates. This suggests a riskier environment, a sentiment that is being more widely acknowledged by people in the survey," Byett said.

He said price expectations were greater in the South Island as this part of New Zealand had experiences the greatest house increases over recent times.

"With a near term and long term outlook for higher house prices, the overall risk and the challenge will be to cope with a potential cyclical slowdown or even downturn over a two to three year timeframe, it is time to exercise caution," Byett said.
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